The UK's Financial Conduct Authority has fined neobank Monzo £21,091,300 over its "inadequate" anti-financial crime systems and controls that were in place between October 2018 and August 2020
Monzo's customer base has grown rapidly, increasing almost tenfold from around 600,000 in 2018 to over 5.8 million in 2022. However, Monzo's financial crime controls failed to keep pace with its customer and product growth says the FCA.
In particular, Monzo failed to design, implement and maintain adequate customer onboarding, customer risk assessment and transaction monitoring systems to mitigate the risk of financial crime. These systemic failings resulted in the FCA requiring a comprehensive, independent review of the firm's financial crime framework in August 2020.
Alongside the independent review, the FCA imposed a requirement preventing Monzo from opening new accounts for high-risk customers. However, between August 2020 and June 2022, it repeatedly failed to comply with the terms of the requirement, including signing up over 34,000 high-risk customers, some with implausible addresses such as 10 Downing Street, Buckingham Palace and Monzo’s own headquarters.
Therese Chambers, FCA joint executive director of enforcement and market oversight, says: "Banks are a vital line of defence in the collective fight against financial crime. They must have the systems in place to prevent the flow of ill-gotten gains into the financial system. Monzo fell far short of what we, and society, expect.
"Monzo onboarded customers on the basis of limited, and in some cases, obviously implausible information - such as customers using well known London landmarks as an address. This illustrates how lacking Monzo's financial crime controls were. This was compounded by its inability to properly comply with the requirement not to onboard high-risk customers."
Monzo says it has established and completed a financial crime change programme to remediate its wider financial crime control framework in line with recommendations made in the independent review.
Fellow neobank Starling in October was hit with a similar £29m fine for what the regulator defined as 'shockingly lax' AML screening